Business

Petrolimex and JX Nippon Oil & Energy sign MoU

Released at: 16:18, 24/12/2014

MoU permits the two companies to speed up the process of the Japanese company becoming a strategic partner of Petrolimex.

Petrolimex and JX Nippon Oil & Energy (JX NOE) signed a memorandum of understanding on bilateral strategic cooperation on December 19. Prior to the signing, JX NOE also met with government officials and the Ministry of Industry and Trade.

Mr. Nguyen Van Khanh, Head of Petrolimex Petrochemical, said last month that the two parties are holding discussions on making the Japanese investor the main partner in the Nam Van Phong project, which is located at the Nam Van Phong Economic Xone in south-central Khanh Hoa province. With negotiations completed, the two companies will establish a joint venture to implement the project.

Nam Van Phong is estimated to have a capacity of 10 million tons per year, according to the Ministry of Industry and Trade, and total investment is expected to be $8 billion. It was approved by the government and Petrolimex was assigned to plan and select a foreign partner with sufficient ability, experience and commitment to provide long-term crude oil and raw materials. The plant is expected to be put into operation in 2020 at the earliest.

Mr. Khanh also mentioned that Vietnamese partners, including Petrolimex, will participate in the project with capital investment of no more than 30 per cent initially. This may be increased under a suitable schedule agreed to by the parties.

“This is a project that opens up a new stage of development for Petrolimex and JX NOE,” Petrolimex said.

However, the bigger interest for JX NOE seems to be Vietnam’s retail gasoline market. The major consumption potential and the opening up of foreign investment in Vietnam and Indonesia have attracted its attention.

Vietnam’s retail gasoline market has not been opened up to foreign investors as yet, except for investors who participate in building refineries in Vietnam. Only the Nghi Son Oil Refinery project, with a capacity of 10 million tons of crude oil per year, is being developed with the participation of foreign partners: Idemitsu Kosan, Mitsui Chemicals (Japan) and KPI (Kuwait). The partners involved in Nghi Son gained approval from the government to establish a joint venture for product distribution when the plant comes into operation, on the condition that the contributed capital of the Vietnamese side account for a minimum of 51 per cent. An expert in the gas and oil industry said that with this situation, JX NOE cooperating with Petrolimex is a wise step for it to enter Vietnam’s retail gasoline market.

With charter capital of VND10.7 trillion ($500.33 million), Petrolimex conducted its first IPO in July 2011 and became a joint stock company, with the State holding 94.99 per cent. With 5.01 per cent of shares sold, Petrolimex earned nearly VND649 billion ($30.33 million) for the State. Petrolimex currently accounts for 48 to 55 per cent of gasoline market share in Vietnam, according to oil companies.

In previous statements from Petrolimex, it said it prioritized strategic partners who have technical strength relating to upstream activities and technology transfer. They hoped to find foreign partners and reduce State capital to 75 per cent.

It is likely that Petrolimex will issue additional shares to foreign strategic partners to reduce the capital share the State holds. The number of shares JX NOE could possibly buy will depend on the proportion of their capital contribution in the Nam Van Phong project.